In todays world of high labor costs and increasing demand, the need for accurate and timely customer service levels is more important than ever. Labor costs typically account for half the costs in distribution. In order to stay competitive, it becomes imperative that companies start looking for savings in this area. Combining engineering methodologies with the best technology provides companies with the most value and sustained ROI in the long term.

By following these five steps, one can implement an Engineered Labor Standard (ELS) successfully and create a high-performance workforce.

STEP 1: Streamlining Existing Processes

The ideal way to start an ELS implementation project is to review existing processes. This is usually done in the form of formal observations to gain an understanding of the interaction between the Warehouse Management System (WMS) and the processes. These observations help in documenting current processes and functional relationships. Documentation in the form of flowcharts (value stream maps) helps to distinguish between value-added (VA) and non-value added (NVA) steps in the process.

Some examples of VA steps include scanning the item (necessary) and picking the item from its source location (necessary). On the other hand, some examples of NVA steps include travel between locations, which is still necessary, and avoidable delays (unnecessary).

It is essential to eliminate any NVA unnecessary steps present in the process. It is also beneficial to create an actions list for every process. This list generally contains every issue that can cause a hindrance and prevent associates from performing with best practices and methods.

The actions list should be submitted to the management team in charge of the ELS implementation for follow-up. It is essential to fix these issues imagine someone working in a full case pick environment with no access to a box/knife cutter. How does this associate cut or remove the shrink wrap on the pallets when he or she visits a location to pick from?

Always get feedback from your associates when developing the actions list, as they are the ones who spend the maximum amount of time working in the process on the floor.

STEP 2: Create Elements

After we have eliminated the NVA unnecessary steps and fixed all known issues in the actions list, the next step in implementing the ELS is to create elements. Elements are small work-steps in every process or function that can be measured by means of a unit of measure, accurately and consistently. A unit of measure is any unit that can be counted, e.g. number of cases, number of units, number of lines, number of pallets, etc.

Breaking down a process into elements facilitates the next step (collection of data/time study). A guideline to use here is, if you see it, you can measure it. At the same time, you do not want to dive too much into detail. You want to keep it as simple as possible. Given below is an example of elements for picking full case items.

1. Travel to location

2. Scan source location

3. Verify sku / Enter F3 on Radio Frequency (RF) device

4. Pick item from location / Place item to destination

5. Enter quantity in RF device

RF devices are handheld or equipment-mounted devices that are used to communicate with the WMS/LMS via access points set up in the distribution center. RF devices transfer information back and forth between the WMS/LMS and the end-user.

From the above example, element number three can be further split into two different elements verify sku and Enter F3 on RF. Element number two occurs when an associate verifies sku information and presses the F3 key on the RF gun to accept/enter the information. In reality, for a major portion of the time, these two elements are normally performed simultaneously, which in turn relates to the best practices and methods of picking.

STEP 3: Collection of Data/Time Study

Data for a labor standard is collected by conducting a time study, which is nothing but determining the amount of time it takes each of the elements to be completed. A traditional time study analysis is done using a stop watch and notepad to note down any breaks in time. However, it will become extremely difficult to use the stopwatch as more attention will be spent on writing on your notepad rather than actually observing the process.

A more efficient and reliable process is using time study software such as UMT Plus, TimerPRO, Quetech, etc. The elements for the process that have to be time studied are created when the software is downloaded to your PC. A compatible version of the software is then transferred to a PDA device, which is used to conduct time studies. Stop times across elements are noted on the PDA. Once the time study is completed, the data is transferred back to your PC in the form of an excel spreadsheet. The excel spreadsheet makes it easier to perform any data analysis or calculations.

STEP 4: Data Analysis/Data Validation

This is the most important and time-consuming step in creating an ELS. Time study data will show the number of occurrences and the time across each occurrence, for each element. The time per occurrence is then calculated from this information (time per occurrence = total time / number of occurrences). An important step at this stage is grade factoring. A grade factor is applied as a percentage to the time per occurrence.

Grade factoring is the process of comparing the pace and skill of an associate to establish average pace and skill levels. An average grade factor of 100% is given to a trained associate who works in a safe manner while using the correct methods at an average pace that can be sustained for an entire shift. Grade factoring is done to ensure that everyone is at a level playing field across all operations. In some time study software, the grade factoring process can be done during the time study itself.

Time study data is then fine-tuned to minimize variation across elements, which is essential when elements have a high number in terms of occurrences. Such elements represent a major percentage of time in the study when compared as a whole, i.e. scan item, pick item, travel to location. Up to this point, we have only created level time the amount of time it should take an associate to perform a function working with normal skills, an average pace and under normal conditions, where allowances are not included associated with the standard. Standard time, or Standard Allowable Minutes (SAMs), are created by adding allowances to the level time to account for Personal, Fatigue and Delay (PFD) time.

The PFD allowance factor accounts for the difference in picking a heavy versus light case; working in dry/ambient temperature areas versus working in cooler/freezer type environments. SAMs are created by adding a PFD percentage to the level time.

An example of the Standard worksheet shows the different elements in the Picking standard with their corresponding SAMs. The SAMs are in turn associated with different time buckets (shown as 12010, 12020, 12030, etc.) in Labor Management Software (LMS). These time buckets are nothing but screens in an LMS where the SAMs are entered. As an example, 12010 is a time bucket associated with item. The corresponding element associated with the item time bucket is scan location. In other words, each time a location is scanned, a SAM value of 0.045 minutes is credited to the item picked from that location. Each LMS has a different set of time buckets. You will always see a generic screen for travel time, pick time, set-up time and PFD percentage in the LMS.

After the SAMs are entered into the LMS, the ELS needs to be validated. Validation can be done by a number of methods. If the LMS is set up already, a standard can be validated by checking variation across time buckets and overall variation in the standard. A guideline is to keep the variation as low as possible (in a +/- one percent range).

The standard is measured in as a percentage of standard time (SAM) versus time it took the associate to actually complete the process (minus any delays). This measurement is also known as performance. In other words, performance is defined as: Performance (%) = Standard time/Actual time.

If the LMS has not been implemented, a mock time study is performed on the process. This is a general observation on a number of associates performing the standard function. The time taken to perform the function along with different unit of measures is noted down during the observation. Performance of each associate is then calculated to check whether associates can meet the average performance expectations.

Another method used to validate standards is to create MOST models on the current process and compare this with the existing standard.

STEP 5: Rollout ELS/Post Labor Standards Implementation

Once the ELS has been created and validated, it should be rolled out to the management team and associates. The rollout is basically a walk through/review of all the steps that were taken to create the standard. The rollout also gives an opportunity for the associates to ask questions and clear up any doubts that they have about the labor standard.

After the rollout is completed, it is essential to get associate buy-in with the labor standard. Post standards implementation, the area managers and supervisors conduct observations on associates to prove to them that they can meet the average performance expectation and, in some cases, even exceed the expectations. This not only creates confidence in the standard from the associates point of view but also gives confidence to the supervisor in their overall process.

On a daily or weekly basis, area supervisors will also run labor reports, which show the associates and overall departments performance. Work does not end for the industrial engineer here. Post standard rollout, they will be actively involved with supervisors, overseeing the observations process and checking for variations in the labor standard, which may arise due to changes in the process and maintenance of the existing labor standard.

As a final step, it is recommended to implement an incentive program for associates who are consistently performing above expectations. Incentives not only boost associate morale and motivation but have also shown to increase overall productivity by 20-30%.

The steps to create successful engineered labor standards combine the use of pre-determined time systems, time and motion studies as well as work sampling to evaluate and measure labor activities. The resulting standards save time and money for your distribution centers, retail store and delivery operations, and they keep management and labor motivated and involved. Your results include shorter timelines, reduced implementation costs and the creation of extremely dependable standards.